Why it is necessary to place a limit order when buying or selling a position?

[Melle]

Limit order is another way to make a certain profit. Placing the limit order would help us to cut our losses but it has only limited profit unlike placing a market order. Am i right?

[techmac]

Actually limit order are not the same as stop losses.

Here is a definition directly from SEC :

Limit Orders

A limit order is an order to buy or sell a stock at a specific price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. A limit order is not guaranteed to execute. A limit order can only be filled if the stock’s market price reaches the limit price. While limit orders do not guarantee execution, they help ensure that an investor does not pay more than a pre-determined price for a stock.

To understand where and how an order you place with your broker is executed, you should read Trade Execution: What Every Investor Should Know. For more information on the different types of orders you can place when you buy or sell a stock, please read our investor bulletin “Trading Basics”.

Limit Orders